Sunday, November 07, 2010

De-funder Dog

It's one thing to de-fund portions of the PPACA that are particularly egregious, but the Republicans must address and offer solutions to the the many challenges that face patients today: cost of insurance, lack of competition between insurers, lack of health care cost transparency, insurance portability, and pre-existing condition exclusions.

Cost of insurance.Health insurance companies earn about 4-8% of premiums. Take all of their profit away (put them out of business), and you would gain only about 18 months of current premium increases. Fewer months if you count the price increases due to ObamaCare.

Lack of competition between insurers.The states have made that impossible by demanding that politically connected providers (eg. accupuncture) are covered by all insurance. So, insurance companies in other states can't compete. States should be regulating for fraud and economic prudence, not content or price.

Insurance portability.The tax treatment for health insurance is defective. Your employer can get you a tax discount that you can't get yourself. So, you are tied to your employer. Your insurance policy may be disallowed in another state, also denying portability.

Lack of health care cost transparency.Doctors and hospitals have unreasonably high list prices, so that Medicare can pay them say 60% of list, and they can stay in business. Who would advertise such inflated prices? If a patient complains, they will usually grant a discount after the fact. This is rug bazaar haggling.

Pre-existing condition exclusions.No doctor, hospital, insurance company, state, or the US government can afford to give medical care to everyone after they become ill, unless they are willing to contribute while they are well. That is the basis for insurance. The current "system" gives people the best treatment whether or not they are insured. This makes it impossible to provide the correct incentives to make insurance affordable and widely available. There is no easy way out of this economic fact of life.

Our current health care mess is due to applying a "soak the insurance company" policy to pay for current health care subsidies. The costs of people who can't be billed are being paid by the people who have insurance, and a large hidden tax is flowing from the insured to the uninsured through emergency rooms and hospital charges.

Doctors and hospitals want to treat everyone, so they don't mind shifting costs onto the insured.

The hidden taxes are distorting healthcare, producing the $20 hospital aspirin. Explicit subsidies (parallel to food stamps) would not distort health care markets, but people would see the very high costs and refuse to pay them. Also, Obama would have to admit that his plans impose a large tax on the middle class, not just the wealthy.

This is an explanation of Medicare economics by analogy. Say that tomatoes were declared vital to life and made available free through the Medicare National Tomato Bank. This translates the story of the healthcare to the tomato market.

"force insurance companies to compete across state lines" = allow insurers to domicile in the least regulated states and offer the stingiest benefits. Not a way to improve health care.

As for defunding, well, it's at the moment a pipe-dream. The majority of PPACA doesn't go into effect until 2014, and most of that funding is statutory (meaning not subject to the budgetary process). So the house can't defund it any easier than they can repeal it. And most regulations can't be blocked by a single house of congress without running the gantlet of a veto. So for the moment, defunding is in ineffective tactic against the PPACA. Now in 2012, if unemployment is still ~10%, then anything will be possible.

I would be interested to hear GOP solutions to the health care issues Wes cited, though. I've been listening for 3 years and haven't heard any yet.

Shielding insurance companies from national competition is a sure fire way to increase costs and decrease benefits. Allowing states to dictate what is covered is a sure fire way to politicize medicine. These are experiences we have already been through. Competition is hard, which is why insurance companies prefer to team up with politicians to create miniature fiefdoms in the states. Consumers could only benefit from the ensuing competition that would result from abolishing this corrupt system. The notion that increased competition would "allow insurers to domicile" anything is absurd. How else can insurance companies compete other than offering more benefits than the other guy (after their state mandated monopolies are removed)?

Dr. Wes,Just because I've not run across the subject somewhere in your blog, doesn't mean it's not covered. But, I'm wondering if you can tell me if there's data on the odds of a TakoTsubo recurrence. Thank you,Suesbte@windstream.net

I practice in Virginia. I have no interest in negotiating a fee schedule with the five largest insurers in Wyoming (or any other of the remaining 48 states). Any patient I see with such insurance will have to pay full fee, cash at the time of service. Without provider networks in each state, how can insurers compete nation-wide?

At the risk of sounding curt, I think you answered your own question. The customers of insurance companies includes doctors, and if they make their fee schedules too difficult to deal with, doctors will have the option of just passing the paperwork burden on to their patients. Fee for service, with the patients working out the insurance payments with their own insurance company, is a viable option.

But how can an insurer that has its enrollees pay full fee for service and then get a partial re-imbursement be able to compete with the local Goliath that has negociated fees that are 50% lower? (both in terms of attracting enrollees and long term financial viability)

This is a huge problem with our current system, I agree. But a lot of the discrepancy between fee for service charges and insurance negotiated charges have to do with the current unholy alliance of insurance companies with political forces which shield them from true competition. No system is perfect, but removing these barriers to competition would go a long way towards closing that discrepancy and making insurers more competitive.

About Me

Westby G. Fisher, MD, FACC is a board certified internist, cardiologist, and cardiac electrophysiologist (doctor specializing in heart rhythm disorders) practicing at NorthShore University HealthSystem in Evanston, IL, USA and is a Clinical Associate Professor of Medicine at University of Chicago's Pritzker School of Medicine. He entered the blog-o-sphere in November, 2005.
DISCLAIMER: The opinions expressed in this blog are strictly the those of the author(s) and should not be construed as the opinion(s) or policy(ies) of NorthShore University HealthSystem, nor recommendations for your care or anyone else's. Please seek professional guidance instead.